BOK cuts key rate in 6-1 vote in May

One policymaker at South Korea's central bank opposed a key interest rate cut in May, citing signs of economic recovery, but others raised the need to support the government's efforts to boost growth, the bank's minutes showed Tuesday. At a rate-setting meeting held on May 9, the Bank of Korea (BOK)'s seven-member policy committee decided to slash the benchmark seven-day repo rate by a quarter percentage point to 2.5 percent in a 6-1 vote. The May cut followed similar actions in July and October last year. The minutes said Moon Woo-sik, a BOK board member, opposed the rate cut, arguing that the global economy is likely to be on a moderate recovery path despite downside risks such as the eurozone debt crisis. "It seems that the need to further pursue the easing stance is seen as small, given the economic performance in the first quarter, the anticipated growth path and liquidity conditions," Moon was quoted as saying in the minutes. Moon, a professor at Seoul National University, became a BOK board member in April 2012 after being recommended by the central bank. In May, the BOK lowered the borrowing costs in a bid to lend support to the government's drive to stimulate the economy as the yen's slide threatened to weigh it down. The decision surprised the market as more market players bet on a rate freeze following relatively hawkish remarks made by BOK Gov. Kim Choong-soo before the May meeting. One board member, who argued for a rate cut this month, said that the rate cut will help the economy recover to its long-term growth path, but there is the need to watch the impacts of the rate reduction for the time being, according to the minutes. Another policymaker noted that the May decision will help ease upward pressure on the Korean won as the yen has depreciated against the U.S. dollar, aided by Japan's massive bond buying. The BOK governor, also chairman of the BOK's policy committee, usually follows the majority view at the monthly rate-setting meeting. The governor casts a final vote only when opinions are evenly split. The BOK froze the key rate in a tight 4-3 vote in April, indicating that the BOK's policymakers had deep divisions in their assessments of economic conditions. The BOK's next rate session is slated for June 13.